The Bank of Japan (BOJ) maintained its key short-term interest rate at 1.25% during its meeting on Friday. This decision was made as the bank has increased the pace of selling its exchange-traded funds (ETFs) to 860 billion yen (equivalent to $5.46 billion) from the previous 330 billion yen ($2.09 billion).
Details of the Policy Meeting
The bank's policy board, by a vote of 8 to 1, maintained guidance for money market operations and kept the overnight call rate at around 1.25%. Board member Hajime Takata opposed this decision and proposed raising the rate to 1.5%. He argued that consumer price inflation has reached the central bank's price stability target and that the bank should accelerate the pace of rate increases to neutral levels. This proposal was rejected by a majority vote.
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Implications of the Bank's Decision
This decision follows the U.S. Federal Reserve also keeping its benchmark interest rate steady at 3.75% to 4% on Wednesday. The U.S. central bank has stated that inflation remains high and economic activities are continuing strongly.
Alongside the rate decision, the central bank unanimously approved increasing the pace of ETF sales. The new annual sales target of 860 billion yen ($5.46 billion) will be implemented as of January 2027. The Bank of Japan has stated that it has been continuously selling ETFs since January 2026 without causing significant market impact, and trading volumes have also increased.
The bank's statement noted: "In light of these developments, at the policy meeting held today, the bank decided to sell its ETF assets by about 0.1% of the trading value in the market." The new annual sales target represents a significant increase compared to the previous annual target of 330 billion yen ($2.09 billion), which constituted about 0.05% of the market trading value. Based on market value, the new annual sales will be approximately 2.46 trillion yen ($15.58 billion).
The Bank of Japan also indicated that it may temporarily adjust or suspend sales depending on financial market conditions while remaining within the annual pace. The annual sales of Japanese real estate investment trusts (J-REITs) will remain unchanged at about 5 billion yen ($31.66 million) based on book value.
The recent decision follows a rate increase by the bank in September of 25 basis points to 1.25% from the previous 1%, which is the highest level since 1995.
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